The Amendment of the Commercial Code

J.s.a. merges specific features of the Limited Liability Company (“s.r.o.” from Slovak term “spoločnosť s ručením obmedzeným” like simple corporate structure and low value of the registered capital); and Joint Stock Company (“a.s.” from Slovak term “Akciová spoločnosť” like certain number of stocks and shareholders liability for the obligations of the company). As j.s.a. is mainly intended for the startup business purposes, it allows investors to step in and out of the company in a simple way.

Minimal amount of the registered capital for j.s.a. as low as EUR 1 is the lowest among all other companies (EUR 5,000 in s.r.o. and EUR 25,000 in a.s.). The registered capital should be subscribed and the stocks should be paid up prior to the incorporation of the company and therefore the incorporation upon the call on subscribing of stocks is not allowed. One or more founders may set up j.s.a. and its Articles of Association must be executed in the form of notarial deed. The company must register its stocks with the Central Securities Depository of Slovak Republic (“CDCP” from Slovak term “Centrálny depozitár cenných papierov”) since it may issue only registered stocks. Costs required for incorporation of j.s.a. may be therefore doubled compared to s.r.o.

Moreover, j.s.a. may connect almost any specific rights with its stocks, what partially breaks the legal rule to only issue types of stocks explicitly specified by law, applied to a.s. It is also possible to completely exclude specific rights connected with the stocks of j.s.a. (e.g. voting right which is not possible in a.s.), not only to restrict them.

Shareholder Agreements are newly codified by the Commercial code, whereas their three most common types are explicitly regulated for the purposes of j.s.a.: a) Tag-along, as a shareholder´s right to join the transfer of other shareholder´s stocks to the third person; b) Drag-along, as a shareholder´s right to request other shareholders to transfer their stocks to the third person; c) Shoot-out, as a shareholder´s right to request on other shareholder acquisition of its stocks for the price defined by the requesting shareholder. The Tag along and Drag along rights may be registered with the CDCP, what significantly enforces the legal status of the entitled shareholder (e.g. to claim its right also against the third person – an acquirer, not only against the obliged shareholder).

J.s.a. should compulsorily establish the General meeting and the Board of Directors while the Supervisory Board may be set up voluntarily.

J.s.a. may be dissolved also due to reasons stated in the Articles of Association or company´s bylaws, therefore not only on the basis of General meeting resolution as applied to other companies. J.s.a. may only change its legal form to a.s., while other sorts of companies may not change their legal form to j.s.a.

The § 66c of the Commercial Code regulates Shareholder Agreements generally and explicitly allows shareholders to conclude agreements governing their mutual rights and obligations arising from their share in the company (e.g. performance of voting right, profit distribution, registered capital changes etc.). Shareholders may enter into any agreement which does not contradict mandatory provisions of the Commercial Code; their content is stipulated only demonstratively. Shareholder Agreements are not part of the Collection of Deeds held by the Commercial register and so their content is not public. The discrepancy between the decision of one of the company´s bodies (e.g. resolution of the General meeting) and the content of the Shareholder Agreement does not invalidate such decision. Shareholders should therefore define the consequences of the breach in the agreements.

As for the Shareholder Agreements concluded before 31 December 2016, despite previous absence of their legal regulation, they are considered as valid and enforceable (if there is no other ground for their invalidity - such as their inconsistency with the good manners). Generally, Shareholder Agreements are usually not regulated and their explicit regulation is more an exception. The agreements concluded between the shareholders and the company itself, or members of its bodies regarding performance of voting right, remain forbidden according to § 186a of the Commercial Code (opposite to agreements on voting right concluded between shareholders).

The abovementioned Tag-along, Drag-along and Shoot-out rights represent typical content of the Shareholder Agreements and can be used with all the types of the companies, despite explicit regulation with j.s.a. only.